Core Insights - The Brazilian sugar-cane industry is facing significant challenges due to increased competition from corn-based ethanol, leading to a shift in production focus towards sugar even amid low prices [1][9] - Sugar futures have declined by approximately 22% this year, marking the largest annual loss since 2017, with global production expected to exceed consumption by 2.8 million metric tons [3][9] - Brazilian cane millers are projected to produce a record 43 million metric tons of sugar in the upcoming harvest, a 4.6% increase from the previous year, despite the unfavorable market conditions [3][9] Industry Dynamics - The rise of corn ethanol production in Brazil is causing sugar-cane processors to divert more of their crop towards sugar production, as corn-based ethanol is cheaper to produce [5][9] - The share of corn-based ethanol in Brazil's gasoline substitute production is expected to rise from 23% to 32% in the upcoming season, further intensifying competition for sugar-cane processors [5][9] - Analysts indicate that the outlook for record ethanol supplies may lead to lower prices, making sugar production a more favorable option for millers, particularly in São Paulo [6][9] Company Performance - Shares of Raizen, Brazil's largest sugar-cane processor, have decreased by 56% this year, while smaller competitors Jalles Machado SA and Sao Martinho have seen declines of 42% and 37%, respectively [6][9] - Sugar-cane processors have expanded their sugar-making capacity in recent years to capitalize on previous surges in sugar prices, but are now facing a challenging market environment [7][9] - Economists suggest that Brazilian cane millers will have no choice but to increase sugar production in response to the current market dynamics [8][9]

Group 1 - The main contract for late indica rice futures remains unchanged at 2535.00 yuan/ton as of the report date [1] Group 2 - According to foreign media forecasts, U.S. corn net export sales for the 2025/26 marketing year are expected to be between 800,000 to 2,000,000 tons as of the week ending October 16, 2025 [2] - The Brazilian National Association of Grain Exporters (ANEC) anticipates that Brazil's corn exports for October will reach 6.57 million tons, an increase from the previous week's estimate of 6.46 million tons [2] - As of the week ending October 17, the deliverable inventory of corn at CBOT was reported at 15.067 million bushels, a 23.80% increase from the previous week’s 12.17 million bushels, but a 37.27% decrease from the same period last year when it was 24.019 million bushels [2] - The Executive Director of the International Sugar Organization (ISO) stated that U.S. government subsidies to corn growers distort U.S. corn ethanol export prices, impacting market competition [2]

Group 1 - Corn futures are experiencing a decline, with contracts down 2 to 3 ¼ cents at midday, and the national average Cash Corn price is down 3 cents to $3.78 1/2 [1] - The average close for December corn futures has been $4.19, with less than 2 weeks remaining for harvest price discovery for crop insurance [1] Group 2 - A South Korean importer has purchased a total of 67,000 MT of corn in a recent tender [2] - Brazil's corn exports for October are estimated at 6.57 MMT, reflecting a 0.11 MMT increase from previous estimates [2] - Datagro projects Brazilian corn ethanol production to grow between 3-3.5 billion liters (792-925 million gallons) in the 2026/27 period, with an expected increase in ethanol imports in 2025/26 [2] - Current corn prices include Dec 25 Corn at $4.20 (down 3 1/4 cents), Nearby Cash at $3.78 1/2 (down 3 cents), Mar 26 Corn at $4.34 1/4 (down 2 3/4 cents), and May 26 Corn at $4.42 1/2 (down 2 3/4 cents) [2]

Group 1 - Brazil's sugar production has reached the same level as last year, with a total sugar production of 33.52 million tons, an increase of 0.84% year-on-year [2] - The sugarcane crushing volume in Brazil's central-south region was 40.858 million tons, a year-on-year increase of 5.1%, while the sugar production ratio increased to 51.17%, up 3.44% from last year [2] - Ethanol production from sugarcane has decreased, with a total of 2.213 billion liters produced, down 1.5% year-on-year, while corn ethanol production is expected to rise significantly in the coming years [3] Group 2 - Brazil's sugar exports in September were 3.2448 million tons, with an increase in the amount of sugar waiting for shipment at ports to 3.7272 million tons, a 3.3% increase from the previous week [4] - Domestic sugar imports are expected to decrease from October, with September imports reaching around 800,000 tons, the highest this year, but a decline is anticipated in the following months [5] - Current domestic sugar prices are stable, with mainstream quotes ranging from 5,840 to 6,000 yuan per ton, influenced by the arrival prices of sugar from Guangxi [5]

Core Viewpoint - The U.S. Environmental Protection Agency (EPA) has proposed a plan to redistribute the small refinery exemption (SRE) obligations for biofuel blending to larger refineries, offering options of 50% and 100% redistribution, while also seeking public input on other potential ratios [1][2] Group 1: Proposal Details - The EPA's proposal includes a public comment period of 45 days, which is considered crucial by industry officials [1] - The biofuel industry advocates for a full 100% redistribution to maintain demand for products like corn ethanol, while refiners oppose this, citing increased costs [1] - The proposal is seen as a "stalling tactic" by some industry officials, indicating a lack of substantial progress [1] Group 2: Background Information - According to the Renewable Fuel Standard (RFS), refineries are required to blend billions of gallons of biofuels annually or purchase renewable identification numbers (RINs) from compliant entities [1] - Small refineries can apply for SRE exemptions if they demonstrate that blending requirements would cause financial hardship [1] - The EPA cleared over 170 SRE exemption applications from 2016, necessitating a compensation plan for the obligations [2] - The total amount of exemptions from 2023 to 2025 is equivalent to 2.18 billion RINs [2]

Report Summary 1. Report Industry Investment Rating No relevant content provided. 2. Core Views - **Corn**: In the domestic market, the new corn season is approaching in the Northeast production area. Reserve rotation corn is continuously released to supplement market supply. Traders' confidence in price support has weakened, accelerating the sale of remaining grains. Feed - using enterprises have relatively sufficient inventories and low procurement enthusiasm, preferring to wait for new grains. Some price - setting enterprises have continuously lowered their quotes. Recently, due to short - covering by bears, the corn futures price has rebounded slightly from the low level [2]. - **Corn Starch**: With the resumption of work of previously overhauled enterprises, the operating rate of the corn starch industry has rebounded recently, increasing supply - side pressure. Meanwhile, downstream demand is still in the off - season, with poor order signing and shipment. The supply of corn starch far exceeds demand, and inventory pressure remains high. Affected by the corn rebound, the starch price has oscillated higher [3]. 3. Summary by Directory Futures Market - **Domestic Futures**: The closing price of the active corn starch futures contract is 2193 yuan/ton (up 2 yuan), and that of the active corn futures contract is 2500 yuan/ton (down 1 yuan). The 1 - 5 corn monthly spread is - 69 yuan/ton, and the 11 - 1 corn starch monthly spread is - 35 yuan/ton (down 2 yuan). The active - contract positions of yellow corn and corn starch are 974389 hands and 205537 hands respectively, with the latter down 3350 hands. The net long positions of the top 20 futures holders for corn starch and corn are - 83289 hands and - 35460 hands respectively, with the latter down 427 hands. The registered warehouse receipts of yellow corn and corn starch are 67737 hands and 7450 hands respectively, with the former down 1689 hands. The CS - C spread of the main contract is 226 yuan/ton (down 20 yuan) [2]. - **CBOT Futures**: The closing price of the active CBOT corn futures contract is 9.25 cents/bushel. The total CBOT corn positions are 1456701 contracts (down 109666 contracts), and the non - commercial net long positions are - 70940 contracts (up 34270 contracts) [2]. Spot Market - **Corn Spot**: The average spot price of corn is 2364.12 yuan/ton (down 0.59 yuan), the FOB price at Jinzhou Port is 2280 yuan/ton (up 10 yuan), and the CIF price of imported corn is 1926.14 yuan/ton (down 15.15 yuan). The international freight of imported corn is 0 dollars/ton. The basis of the corn main contract is - 2.59 yuan [2]. - **Corn Starch Spot**: The ex - factory quotes of corn starch in Changchun, Weifang, and Shijiazhuang are 2660 yuan/ton, 2900 yuan/ton, and 2830 yuan/ton respectively, all unchanged. The basis of the corn starch main contract is 160 yuan (up 1 yuan), and the weekly spread between Shandong starch and corn is 370 yuan/ton (up 34 yuan) [2]. - **Substitute Spot**: The average spot price of wheat is 2428.06 yuan/ton (down 0.83 yuan), the weekly spread between tapioca starch and corn starch is 184 yuan/ton (up 27 yuan), and the daily spread between corn starch and 30 - powder is - 67 yuan/ton (unchanged) [2]. Upstream Situation - The predicted sown areas of corn in the US, Brazil, Argentina, China, and Ukraine are 398.93 million hectares, etc. The predicted corn yields in these countries are 35.12 million tons, 22.6 million tons, 7.5 million tons, 44.3 million tons, and 30.5 million tons respectively (only the US yield is down 0.25 million tons) [2]. Industry Situation - **Inventory**: The corn inventories at southern ports, northern ports, and deep - processing enterprises are 9.9 million tons, 175 million tons, and 294.2 million tons respectively, with the latter down 20.5 million tons. The weekly inventory of starch enterprises is 131.8 million tons (down 2.1 million tons, a 1.57% weekly decrease, 0.53% monthly increase, and 31.41% year - on - year increase) [2][3]. - **Trade Volume**: The monthly import volume of corn is 6 million tons (down 10 million tons), and the monthly export volume of corn starch is 15940 tons (up 1440 tons) [2]. - **Output**: The monthly output of feed is 2827.3 million tons (down 110.4 million tons) [2]. Downstream Situation - The average inventory days of sample feed corn is 28.13 days (down 0.72 days). The deep - processing corn consumption is 114.02 million tons (up 0.4 million tons). The operating rates of alcohol and starch enterprises are 42.87% and 51.01% respectively, with the latter down 1.29% [2]. - The processing profits of corn starch in Shandong, Hebei, and Jilin are - 117 yuan/ton (down 11 yuan), - 51 yuan/ton (up 11 yuan), and - 79 yuan/ton (down 14 yuan) respectively [2]. Option Market - The 20 - day and 60 - day historical volatilities of corn are 7.91% (up 0.02%) and 6.37% (down 0.17%) respectively. The implied volatilities of at - the - money call and put options on corn are 10.01% (up 0.18%) and 10.02% (up 0.19%) respectively [2]. Industry News - Brazilian ethanol producer Inpasa and grain processing and export giant Amaggi will establish a joint venture to build at least three new corn ethanol plants in Mato Grosso [2]. - The Buenos Aires Grain Exchange (BAGE) reported that the corn harvest in Argentina is nearing completion. As of August 27, the harvest progress of the 2024/25 Argentine corn crop was 97.2%, 1.3% higher than a week ago [2]. - Pro Farmer's final yield forecast report shows that the total US corn production in 2025 is expected to reach 1.6204 billion bushels, with an average yield of 182.7 bushels per acre, which is a record high but lower than the USDA's August forecast of 1.6742 billion bushels and 188.8 bushels per acre [2]. Key Points of Concern - Monitor the weekly corn consumption and the operating rate and inventory of starch enterprises on Thursday and Friday as reported by Mysteel [3].

Core Insights - Brazil's corn ethanol production has surged, with Mato Grosso state leading the increase, raising questions about the global biofuel market's response and potential supply-demand imbalances in the future [1] Group 1: Production Insights - The increase in corn ethanol production in Brazil is significant, particularly in Mato Grosso, which is expected to impact the global biofuel market [1] Group 2: Market Implications - The surge in production may lead to potential supply-demand imbalances in the biofuel market, prompting industry stakeholders to reassess their strategies [1]